Dubai mortgage deals surge 91% in H1 on back of lending reforms, rise in end-users

Dubai - The value of mortgages recorded in the emirate reached 20.9 billion in January 2021.

Mortgage transactions in Dubai recorded a 91 per cent increase between second half of 2020 and first half of 2021, underscoring the strong rebound in realty market as well as the sustained trend in low interest and the availability of competitive mortgage products.

Mortgage Finder, an independent mortgage consultancy and part of the Property Finder Group, said in its report that in the first half of 2021, 40 per cent of all sales transactions in Dubai were completed with a mortgage.

Ian Vaughan, senior mortgage consultant at Mortgage Finder, said there had been a significant uptick in demand in the first half, “which is really positive news and indicates more people are reaching the goal of owning their own home in Dubai.”

Vaughan attributed the increase in activity in the market, in part, to the major reform in lending policy introduced by the Central bank of the UAE in early 2020, which allowed banks to lend 5.0 per cent more, reducing the down payment requirement for first-time buyers from 25 per cent to 20 per cent. “This change has made getting a mortgage more accessible for some people.”

The average mortgage (loan) amount increased by 24 per cent from H2 2020 to H1 2021, with the average mortgage size in the first half of 2021 sitting at Dh 2.2 million.

According to the Dubai Land Department (DLD), the value of mortgages recorded in the emirate reached 20.9 billion in January 2021, the highest since October 2016. Total sales for the month also hit Dh29.4 billion, the highest since January 2018.

The data highlighted that the property market in Dubai remains resilient and continues to generate investor interest despite the coronavirus pandemic.

Dubai’s property market had been under pressure prior to the Covid-19 pandemic, owing to the supply glut in the market. Prices and rents fell further after the pandemic took a heavy toll on the economy.

The last few months of 2020, however, had seen more buyers taking advantage of the low prices, prompting analysts to predict that the market is stabilising.

Mortgage Finder report noted that there was an almost 50/50 split in mortgage transactions for villa/townhouses and apartments, with the villa/townhouse segment coming in slightly higher at 55 per cent. Separately, research from Data Finder showed that in the first half of this year overall sales transactions in the villa/townhouse segment accounted for 27.5 per cent, whilst apartments were 72.5 per cent.

“There has been a lot of interest from borrowers wanting to purchase villas/townhouses, with many of them citing the need for more space as the main reason

The research from Data Finder, coupled with our knowledge on the 50/50 split in completed mortgages for the same segments, suggests that more apartments are being purchased with cash than villa/townhouses. This makes sense given that villa/townhouses tend to be more expensive and the prices of those in prime areas of Dubai have seen notable increases of late. Furthermore, cash buyers often tend to be investors and apartments are generally more favourable for investment purposes,” Vaughan said.

Banks have continued to offer competitive mortgage products and terms, with interest rates remaining at record lows. It is possible to find mortgage rates available now from just 1.99 per cent, compared to 2.49 per cent in the middle of 2020.

“Banks in the UAE are open for business. Many are currently offering great headline mortgage rates to entice borrowers, with some going further and being more flexible in their lending criteria depending on the borrower profile. This is great news for potential buyers, but it also means they need to ensure they do their research and understand the full terms of the mortgage before signing on the dotted line. In essence, it’s more important now for borrowers to shop around and see past just the headline rate to look at the mortgage product as a whole and make sure they are getting the right deal,” said Vaughan.

— issacjohn@khaleejtimes.com